This blog is a collaborative effort with ESG's IoT-focused analyst Eugene Signorini.
Cisco announced it was acquiring Jasper, a an Internet of Things (IoT) platform provider for $1.4 billion (USD). How does a software platform for IoT benefit a networking vendor like Cisco? As I wrote in a prior blog looking back at Cisco Live, their focus for the future emphasizes the importance of architectures, solutions, and outcomes, as opposed to being a vendor of networking equipment, so this brings them one more step closer to creating an IoT architecture that's based on solutions (and not simply devices) and to put more weight on their software assets.
Software platforms are critical to making an IoT network work for any enterprise. The core infrastructure components such as sensors, back-end data stores, and even networking devices are critical pieces of the puzzle, but it's software that will be valuable in the future as it ties everything together.
What a Cisco and Jasper Union Means for IoT
So why Jasper? There are three things in particular that Jasper brings to Cisco for their evolving IoT strategy:
- Mobility. IoT devices can be connected in a myriad of ways, but increasingly many of these devices will be mobile and remote (away from where major IT infrastructure resides, such as a data center). Devices such as cars and home security are some of these use cases. Cisco has always been a leader in enterprise networking. But for IoT, the notion of what constitutes an enterprise network changes. Some of this can be tied closely with computing at the network edge — a notion Cisco calls fog computing — where data processing occurs close to the edge of the network, where data collected from IoT sensors happens. The strength of Jasper’s platform is the ability to provision, connect, manage and monitor IoT devices across mobile networks, filling a gap in Cisco’s portfolio.
- Operator/Service Provider Relationships. Given that many IoT devices will be mobile, relationships with service providers (telecom operators) are critical to help customers scale and streamline IoT initiatives. Jasper can be considered a leader for IoT operator relationships, working with 27 service providers in 100 countries. This complements Cisco’s own service provider customer relationships by providing an added set of offerings.
- SaaS-based Revenue Stream for IoT. At the end of the day, the IoT opportunity for Cisco is all about monetization. For Jasper, this has meant building a cloud-based SaaS platform, with a renewal monthly revenue stream built around a pay-per-connection model. This will allow Cisco to continue to monetize IoT through computing and networking hardware, while expanding into cloud-based business models and recurring revenue. A nice mix. And the revenue impact is immediate, with Jasper bringing 3500 existing IoT customers to Cisco.
One interesting observation was that Cisco has created a partnership with Ericsson in 2015, and Ericsson has an existing IoT platform called the Device Connection Platform (DCP), so this could be a potential area of overlap. Cisco is optimistic in that they see the networking and IoT opportunity to be so large, that there is space for both Jasper and Ericsson DCP. DCP is a M2M (Machine to Machine) platform that offers telecom operators connectivity management for their enterprise customers, and it is closely tied to same use cases that Jasper's product addresses.
IoT Market Becoming a Game for Big Players
Cisco emphasized that there is room to continue to work with Ericsson since the opportunity for IoT is vast. And it’s right — there will be no “be-all-end-all” vendor for IoT. However, it's increasingly apparent that IoT is becoming a game for the big boys. One need only observe IBM’s recent IoT investments, GE’s transformation into a “Digital Industrial” company, and PTC’s M&A activity to see that the gravitational pull of larger vendors will continue to consume start-ups and emerging players either through acquisition or partnerships. This makes sense, as we mentioned in our 2016 IoT predictions. The complexity and enterprise-wide impact of IoT means that multiple assets need to be pulled together to help customers deploy and scale their initiatives.
It's been a while since Cisco dropped north of a billion dollars on an acquisition, but given that people associate IoT with huge (or "yuge", as some say) numbers — trillions of dollars! millions of devices! — this deal seems to be appropriate for that potential business opportunity for Cisco. There are still missing pieces that need to fall into place before truly turn-key solutions are available for enterprises, but Cisco’s acquisition of Jasper is indicative of its intention to become a more comprehensive IoT provider.